Zeek Rewards compliance, tax and marketing issues
About a week ago now Zeek Rewards announced that they were putting out a compliance certification course that was going to be mandatory for all Zeek Rewards members.
Coming in at a cost of $9.95 ($4.95 if purchased within the first 14 days), Zeek Rewards compliance appears to be targeting members who misleading advertise the Zeek Rewards investment opportunity.
Set to launch on Monday the 23rd January, Zeek Rewards recently announced that there were going to be ongoing delays in the roll out of their compliance program.
the process of testing the course, writing the feedback, getting modifications in place and re-testing is going to take a few weeks at least
at this stage Zeek Rewards haven’t set a firm deadline for compliance roll out.
Testing, feedback and yada yada could very well be the reason for the delay but I’m inclined to think there’s more to this story than Zeek are letting on.
Firstly, MLM compliance is nothing new and as far as Zeek Rewards goes, it’s not like we’re covering new territory here. Most MLM companies tend to cover compliance in their terms and conditions and/or distributor agreements so it’s a little strange Zeek are pushing a separate agreement onto their members, let alone one that appears is going to take over a month just to finalize.
Second of all is the fact that partnership with MLM attorney Kevin Grimes or not, exactly how Zeek plan to make themselves legally compliant at this stage appears to be a mystery.
As it stands, I can join Zeek Rewards and invest my money in exchange for VIP bids. Without finding a single customer of my own, I can then transfer these bids to Zeek Rewards, who in turn will accept them and pay me a daily ROI on these bids regardless of whether Zeek actually give my bids away or not.
In essence, Zeek are generating my ROI on the bids I’m supposed to have given away, when infact they as of yet haven’t been given away.
Good luck making that legally compliant guys.
With this fundamental legal flaw existing in the Zeek Rewards compensation plan, I believe this is probably the primary reason for the delays in rolling out the compliance course.
Right now Paul Burks and the other Zeek Rewards admins are probably sitting around wondering how to make the obvious changes to the compensation plan necessary, without losing the bulk of their members who inject money into the company by using it as a straight up investment opportunity.
Unless Zeek abolish the option to sell bids to the company who then pay returns on said bids without actually giving them away, this is simply not possible.
Irrespective of what else is possible within the Zeek Rewards business opportunity, this one aspect of the compensation plan pretty much guarantees that ‘as is’, the Zeek Rewards opportunity is never going to be legally compliant. And I’d love to hear from anyone claiming otherwise.
In the meantime, after initially warning members ‘NOT advertise that there is no Sponsoring or recruiting necessary to earn income‘, despite the fact that this is entirely possible by giving away bids directly to Zeek Rewards who then pay out a daily return before they’ve actually given the bids away, the company has decided this wasn’t enough and effective forty eight hours ago,
After careful consideration and several meetings with our legal teams it has been decided that no independent marketing materials are allowed to be used for the time being.
This includes member created websites, banners, classified ads and any marketing campaigns Zeek Rewards members are running.
Looking at the previous demand from Zeek that its members not mention the fact that you don’t need to recruit or sponsor anyone to participate in the investment scheme, it appears the company accepts this is not the case but still doesn’t want its members advertising this. At least not using any specifically worded copy the company itself hasn’t approved.
One would think if the Zeek Rewards opportunity was straight forward enough the usual ‘don’t advertise income potential etc.’ caveats MLM companies enforce upon their memberbases would have been enough. Evidently the grey area Zeek operate in requires more of a heavy-handed totalitarian approach.
Another thing I’ve been watching over the past few days is discussion amongst Zeek Rewards members over their tax liabilities for participating in the company’s investment opportunity.
Having invested an initial amount into the Zeek Rewards investment opportunity for VIP bids which are then turned into points by giving the bids away to the company, many members hope to grow their daily ROI paid out on their bids by re-investing their daily payout back into the purchase of more VIP bids.
As such, an uncertainty seems to have risen over the question of whether or not the daily payout Zeek issues its members counts as taxable income or a business expense when re-invested back into the company through the purchase of VIP bids.
Earnings wise there’s definitely a clear-cut case that Zeek Rewards pays out members participating in the investment scheme a daily return in cash. Regardless of whether this cash is re-invested back into the scheme or not (on autopilot or otherwise), this is still money being paid to members and as such counts as taxable income.
What will be interesting to see is if Zeek members can claim their bid purchases/re-purchases as a business expense.
On one hand doing so cements the fact that Zeek Rewards is an investment opportunity (you invest your money into the business to get a higher ROI and write off the investment as a business expense), and on the other you have those members who got in early, have amassed thousands – even hundreds of thousands in VIP bids and with heavy re-investment, now face the prospect of having to pay tax on thousands (hundreds of thousands?) of dollars of income from Zeek Rewards.
The problem is they’ve re-invested most of this money (an 80/20 investment rule appears to be popular with Zeek Rewards members) and have nothing to show for it except their VIP points, which outside of the Zeek Rewards business opportunity are worthless.
As far as the company goes, Zeek Rewards will issue tax statements for members who have earnt over $600 but CEO Paul Burks has categorically stated that Zeek Rewards itself will not be issuing tax advice to Zeek Rewards members.
What ultimately happens regarding potential tax owed by Zeek Rewards members will definitely be interesting to see, especially for those who have amassed large VIP point balances and currently enjoy large daily returns on their investment.
Between these tax issues, the fact that Zeek Rewards business model clearly isn’t legally compliant (at least as far as the investment scheme goes) and just how far the company is going to go in controlling how its members market Zeek Rewards, it’ll be interesting to see what happens over at Zeek HQ in the following months.